Margin management is key to all businesses, but it's especially critical in the world of third-party logistics providers, says Nate Endicott, senior vice president of growth with Enveyo.

By their nature, 3PLs tend to be margin-challenged. It’s crucial then, for them to understand the different between billing management and margin management, Endicott says. The first involves thinking about activities on the “front side” — warehousing, pick and pack, storage fees and the like. But they don’t necessarily impact a 3PL’s entire margin calculation, which also involves the “tail end” in the form of transportation and parcel freight. That’s “the most strategic side of enhancing profitability,” he says.

How, then, can 3PLs move “from amateur to pro” in their pricing strategies? Many simply calculate rates as a markup over cost. But the best-in-class move to a discount off published rates, and “figure out ways to put more money back in your pocket.”

Margin application plays a key role in helping 3PLs to scale operations profitably. As volumes grow, Endicott says, it’s important to reduce manual “touches.” Technology tools can help to automate those processes, reducing the cost of adding customers as the business grows.

Better margin management is essential as 3PL operations grow in complexity. “To go get brands,” Endicott says, “you’re trying to be a data technology provider.” And to make that work, 3PLs need to price their services in a more strategic way — moving away from a reliance solely on billing management.

“You’ve got to get laser-focused,” says Endicott. “That margin piece now is all of a sudden at the forefront. Margin is the name of the game for 3PLs.”